Which Tax Forms to Use for Temporary Employees: Contract W2 vs 1099

There is sometimes confusion deciding between a contract W2 vs 1099 form when filing year-end taxes for workers you hire from a temporary work agency. We are here to help clarify the appropriate tax form for these types of employees. We also include a guide to both W2 and 1099 forms to help you understand who gets what form. To cover any and all your tax form needs, AMS tax software provides easy solutions to keep you on track during tax season.



When Would a Temporary Worker Receive a Contract W2 vs 1099?

The IRS treats contractors and employees differently during tax season. Typically, these two roles have clear definitions and are easy to file taxes for. However, temporary workers are an interesting case. Businesses have contracts with temporary workers, but those workers are employed at an agency. Businesses need to know whether to file a contract W2 vs 1099 or if the agency handles the taxes.

Because temporary workers at an agency are not self-employed, businesses should not consider them contractors. Instead, the temporary work agency hires the workers as employees. The work agency is responsible for filing W2s for their employees each tax season since the agency pays the workers, not the businesses using their services.

The only reason a temporary worker would receive a 1099 is if that worker is independent of an agency and is self-employed. Businesses should always understand their relationship to their workers. This is the best way to know what tax forms you are responsible for filing. Generally speaking, work agencies provide temporary workers with a W2.


Understanding the Differences Between Contract W2 vs 1099

Both the W2 and the 1099 report income from the current tax year. Businesses use W2s for employees since the employer withholds a certain percentage of the employee’s total earnings for federal and state taxes. The W2 reports how much employers paid an employee and how much the IRS has already taken.

Form 1099 is for contracted workers who pay their own employment taxes. Businesses who utilize a contractor do not withhold any of their pay for taxes. Instead, they file a 1099 to report the amount they paid a contractor. The 1099 is also for other types of miscellaneous income.


How AMS Software Can Help with Tax Forms

You might have to file a variety of tax forms each year, depending on the type of workers you pay. The AMS 1099 filing software can help you complete your filings with ease. The software has customizable modules, allowing you to pick and pay for only what you need. The software can generate the forms you need when you need them and keep all of your employees’ files organized. Take the confusion out of tax season with AMS’s convenient, easy-to-use tax software.



Download our software demo or talk to our Sales and Information team at (800) 536-1099 to see how our software can work for you.

Software Solutions from AMS

Our W-2 and 1099 Forms Filer is our only required platform. From there, users pick the services they need. Choose from the tools below to build out your customized accounting software.